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Indonesia: Too dry for its own good?

Tempting: Wine connoisseurs and amateurs sample wines at a wine tasting event during the Jakarta Food and Fashion Festival in La Piazza, in Kelapa Gading, North Jakarta, on March 15, 2010. JP/P.J.LEO

“Wine comes in at the mouth/And love comes in at the eye;/That’s all we shall know for truth/ Before we grow old and die./I lift the glass to my mouth,/I look at you, and I sigh.”

W.B. Yeats wrote the poem A Drinking Song on wine and love more than a century ago as he pined for his unrequited love. In modern day Indonesia, where the culture of wine drinking has started to pick up in the last decade, wine lovers can relate to the words in Yeats poem, although they may be sighing for a different reason.

Recently, the Indonesian government announced their plan to revoke the luxury tax on alcoholic beverages; good news for wine lovers who have had to endure up to 400 percent taxes imposed on imported wine. But the euphoria was shattered two weeks later as the government plans to raise the excise by more than 200 percent, which would send liquor prices at least 40 percent higher.

Both plans will come into effect in April and the Indonesia Hotel and Restaurant Association (IHRA) are already saying the plan will hurt the country’s tourism sector, already lagging behind neighboring countries such as the – compared to Indonesia’s size – tiny city state Singapore and Malaysia.

Domestic consumption of wine will also be affected by the price increase, albeit in the short term, according to experts in Indonesia’s wine market.

The Four Seasons Hotel’s The Cellar Wine Shop sommelier Suyanto said the inevitable price increase would have an effect on wine sales. “In the first few months, people will wait and see or they will consume their personal stock first before shopping for new wines,” he said.

Nevertheless, Vin+ wine shop marketing manager Yolanda Simorangkir said the market had been growing 15 to 20 percent in the last four years, despite exorbitant prices. A US$5 wine in France is sold for around $45 in Indonesia. “It did go down for a moment during the [2008 global economic] crisis as people were more careful about spending money on wine,” she said.

A report on wine in Indonesia released recently by companiesandmarkets.com states that the market for wine in Indonesia increased at a compound annual growth rate of 5.1 percent between 2003 and 2008.

So what made Indonesians open their palates to the discerning taste of wine?

To the wine experts, the relaxing of regulations on wine distribution and the mushrooming of fine dining restaurants, wine shops, wine lounges, wine appreciation clubs as well as wine-related events such as wine tastings and workshops have contributed to the increasing interest of Indonesians in drinking wine.

In the 1990s, Suyanto, who worked in a formal restaurant at the Borobudur Hotel prior to working at the Cellar, said people would have to dine in a restaurant in a five-star hotel to enjoy wine. At that time, most wine consumers were foreigners. The barrier to purchasing wine was extreme, as the liquor was only available in duty-free shops.

But now, people can go to a wine shop and choose a bottle of Merlot or Cabernet Sauvignon from the “Old World” wine producers such as France and Spain or from “New World” producers such as Australia, Chile, Argentina or South Africa.

A group of friends can now wind down at Decanter or Cork and Screw, a restaurant and wine lounge.
“Basically, wine drinking is becoming a part of Indonesian culture. Because of its availability, people’s access to wine is increasing,” Yolanda said.

“Back in the day, wine was something that was extremely exclusive and it had yet to become as popular as now,” Yolanda.

Restaurateur Dieter Speers, who helped created the concept for Decanter, said after the 1998 riot, triggered by the Asian financial crisis, Jakarta saw a boom in “awesome” restaurants.

“After the riots, we saw a lot of entrepreneurial spirit; Indonesians opening restaurant, either Asian-based or Western-based ones,” he said. When these restaurants started competing, the service increased, he said. Wine also became available in wine shops.

The first to jump on the availability of wine was the expatriate community, Speers said.

Newcomers in Jakarta from wine-producing countries would always be startled by the overpriced wines marketed in Indonesia, he said. They would refrain from buying their native wine in Indonesia, saying: “This is crazy, I’m not buying”. “After three months, they’d start to scratch their heads, and after six months, they’d say OK”.

In 1998, Reimer would hold wine evenings, inviting some 400 people to a four- or five-course dinner with seven or eight wines to taste for only Rp 400,000 ($44) to Rp 500,000.

These events, which were not aimed to generate profit but to cultivate Indonesian appreciation of wine, became a success. “A lot of Indonesians came and took the opportunity,” he said.

They did not have to spend Rp 800,000 on a bottle of wine they were not sure of, Speers said.

The idea was brilliant, as Indonesians saw no risk in trying out wine they did not understand on their own, he added.

“That was the beginning of a movement and since, more and more Indonesians have learned about wine. The other distributors didn’t want to be left behind, so they held wine events too,” he said.

The movement bore fruit. As currently, wine drinking has become a popular social pastime among young professionals. Speers said both Decanter and Cork and Screw owners tell him the majority of their customers are Indonesian women.

Despite the growing popularity of wine in Indonesia, the wine market value here is still far below its neighboring countries. According to a report compiled by the New Zealand Trade and Enterprise in 2008, the market value of wine in Indonesia was $27.9 million; Malaysia’s was $102.7 million, and Singapore $187.4 million.

Indonesia’s 90 percent Muslim population makes most of the people non-alcohol drinkers. Speers said this spurred the government to show some sensitivity in their policy on alcoholic drinks.

Wine-producing countries have been eyeing Southeast Asia, with its combined population of more than 450 million, as new markets for their products. It is reported that some wine-producing countries are in a state of overproduction. The EU reportedly has a surplus of 1.5 billion liters of wine, while Australia has an accumulated surplus of 100 million cases of wine.

Speer say Indonesia can learn from Singapore or Hong Kong, which are very lax in taxing liquor but generate a lot from value added tax. The tourism industry in Indonesia would be helped a lot by a cheaper and steadier supply of wine. Indonesia has faced wine and spirits shortages leading up to Christmas and New Year holidays, tourism peak times, in the past couple of years.

Speers says today, a good bottle of wine can be purchased for around $2 to $5 in its producing country. Of course, when it reaches the Jakarta shelves, the prices increase four- to fivefold.